XBT PROVIDER AB: Statement On 'bitcoin Gold' Fork
STOCKHOLM, OCTOBER 24, 2017 - XBT Provider AB (Publ) (the "Issuer"), like many other observers and participants within the crypto-currency market, had been anticipating that a further bitcoin fork (commonly referred to as 'Bitcoin Gold') would take place on October 25th at 12:00 UTC. The Issuer was in the final stages of preparing a Press Release for issuance in connection with such anticipated event.
However, the 'Bitcoin Gold' fork in fact took place (in block 491407) on 24th October 2017 at 02:20 UTC. This took many by surprise and the earlier-than-expected timing of the fork is being widely attributed by market commentators to an unexpected increase in the hash-rate resulting in 'blocks' being mined and added to the blockchain more rapidly than anticipated. Since the 'Bitcoin Gold' fork took place sooner than expected, the Issuer must deal with its consequences and wishes to stress that it is fully prepared to do so.
The Issuer wishes to emphasise from its earlier Press Releases concerning the phenomenon of 'forking' (in particular, that of July 29th issued in connection with the 'Bitcoin Cash' fork which took place on August 1st, 2017), that:
- bitcoin forks are not an uncommon occurrence;
- the circumstances, technical construction and ideology represented by each fork are unique;
- the prevailing market-conditions at the time of and following each fork are unique;
- the relative significance of each fork varies;
- it is possible that a particular fork may result in a significant disruption to the underlying asset and, potentially, may result in a market disruption event should pricing become problematic following the fork; and
- it is not possible to predict with accuracy the impact which any anticipated fork could have or for how long any resulting disruption may exist.
For these reasons, (as was the case with 'Bitcoin Cash', is the case with 'Bitcoin Gold' and will be the case for future bitcoin forks unless and until determined otherwise), the policy of the Issuer is to consider the appropriate action to take in light of each fork on a case-by-case basis. The Issuer is conscious of the fact that what may be appropriate in the context of one fork may not be advisable in the context of a different fork.
In the context of the steps which it may be appropriate to take in light of the 'Bitcoin Gold' fork, the Board of the Issuer considers it important to reiterate that investors in the Issuer's Certificates are not thereby holders of bitcoin. As disclosed in the Issuer's Prospectus, its Certificates synthetically track the price of bitcoin; such Certificates are not, therefore, physically-backed by bitcoin. Whilst a hedging arrangement does exist between the Issuer and group companies of the guarantor of the Certificates, Global Advisors (Jersey) Limited (the "Guarantor"), pursuant to which those group companies hold bitcoin to support the Issuer's Certificates, as the holders of bitcoin, it is those group companies that, as a technical and legal matter, would be entitled to hold both coins resulting from any fork (and to therefore benefit from any value-creation as a result of the fork). However, the Issuer wishes to reassure investors in its Certificates that, notwithstanding the lack of a legal requirement to distribute any value created from a fork (including the 'Bitcoin Gold' fork) (other than any enhanced performance of the coin which remains 'bitcoin'), the Issuer is committed to passing such value created (or as much thereof as is practicable) through to the holders of its Certificates at the time of the fork. (Purchasers of Certificates after the beginning of trading hours on October 24th will not be eligible to participate in any value-creation generated from the 'Bitcoin Gold' fork. Such a limitation is consistent with the mechanics and operation of the underlying bitcoin protocol in the context of a fork: a person must hold the relevant private key to the associated bitcoin at the time of a fork in order to be entitled to any value-creation generated by such fork).
Consequently, the Issuer must: (a) assess what, if any, value may have been created as a result of the 'Bitcoin Gold' fork; and (b) in respect of any such value, determine (in its discretion) a suitable and appropriate mechanism to pass the same to the holders of its Certificates at the time of the fork.
The following actions have therefore been implemented by the Issuer and the Guarantor in response to the 'Bitcoin Gold' fork:
- The Guarantor's group companies have moved as much of their bitcoins held on account as is practicable in the circumstances to custodian infrastructure that support both coins resulting from the fork; and
- The Issuer has initiated a 3 month "observation period" during which the Issuer and Guarantor will monitor the relative success (or lack thereof) of the resultant coins, with a particular focus on monitoring the extent to which a consensus develops within the bitcoin community as to which coin is to be regarded as being 'bitcoin'.
The foregoing observation period is designed to enable the Issuer and Guarantor to assess the best course of action to take in order to maximize value for investors in the Issuer's Certificates in circumstances where both resultant coins appear likely to remain in existence. Once the Issuer and Guarantor have agreed upon a course of action during the observation period, details of such proposal will, naturally, be promptly communicated to investors in the Issuer's Certificates.
Considerations which are material in the context of the Issuer's deliberations include the following (which, please note, are not exhaustive):
- the fact that the markets for 'Bitcoin Gold' are currently illiquid;
- certain exchanges and custodians are not currently distributing holdings of 'Bitcoin Gold' to their users;
- the relative hash-rates and mining-difficulty adjustments on each resulting coins' blockchain;
- the degree of economic activity and relative momentum on each coins' blockchain; and
- the technical options which may (or may not) be offered by third party service providers (including brokers, dealers and exchanges) or which may not be economically viable, in respect of the distribution any value-creation resulting from the fork (and procedural constraints thereon).
The Issuer reiterates that it will do all that can practicably be done in the circumstances to maximize value for investors in its Certificates.
THE ISSUER XBT Provider AB (Publ), a CoinShares company, is the Swedish-domiciled issuer of Bitcoin Tracker One and Bitcoin Tracker Euro (COINXBT:SS, COINXBE:SS, respectively) and Ether Tracker One and Ether Tracker Euro (COINETH:SS and COINETHE:SS). These trackers are designed to mirror the return of the underlying asset, bitcoin (in Swedish Kronor and Euro, respectively). In 2015, Bitcoin Tracker One became the first bitcoin-referenced security available on a regulated exchange when it listed on NASDAQ in Stockholm. In 2017, Ether Tracker One became the first ether-referenced security available on a regulated exchange when it listed on NASDAQ in Stockholm. All four certificates are available in 179 countries and are traded in the same manner as any other share or instrument listed on the Nasdaq exchange in Stockholm. The Issuer's Prospectus is approved by the Swedish FSA (Finansinspektionen) and its products are listed on Nasdaq Nordic in Stockholm. XBT Provider AB (Publ) is not a licensed financial advisor. The views presented in this release are the opinions of the Board of XBT Provider AB (Publ) and no other party. Bitcoin and ether are volatile assets and their prices (and the price of securities that are referenced to them) can move quickly. Prospective investors in the Issuer's certificates should carefully consider the suitability of such an investment and, in connection with such a determination, should carefully read the Issuer's latest Prospectus (including, in particular, the risk warnings set out therein).